As a social media influencer, receiving free products and experiences are often part of the job. But what are the tax implications of receiving these gifts?
As accountants, we often get asked by influencers if tax is due on PR gifts they receive. As with many areas of tax, the answer is not a simple yes or no. It depends on the nature, value and purpose of the gift. This is a technical area of taxation, but it is important to understand the tax implications of PR packages to be compliant with HMRC.
In this article, we will discuss HMRC’s rules on PR gifts and when influencers need to pay tax on them.
Do influencers need to pay tax in the UK?
For some individuals, being an influencer is just a hobby. If you earn little to no money from your social media content, then you would be considered a non-trading influencer. Therefore, it is unlikely that you would have to pay tax to HMRC.
If your social media accounts are monetised (through paid posts, advertising and sponsorships), you should register with HMRC once your earnings exceed £1,000. You will then be required to submit a self-assessment tax return to HMRC.
More established influencers could consider operating through a limited company. This would be more tax efficient if their annual profit was in excess of £50K per year.
Do influencers pay tax on the gifts they receive?
Unfortunately, the answer is not simple – it depends!
Three components are taken into consideration when determining if tax is due on a PR gift:
- Monetary value of the gift.
- The nature of the gift.
- The purpose of the gift.
Here is an example:
You receive a gift from a company worth £250 in return for promoting their product and brand on your social media pages.
This gift is taxable because it is worth more than £50, the gift can be exchanged for cash and its purpose was to promote the product on your social media channels. The amount of tax you pay is set by HMRC. Currently, the tax rate for PR packages is 10%.
How does HMRC define a taxable PR gift?
HMRC has outlined the following criteria for determining whether a PR package is subject to tax:
- Monetary value – if the gift is a tangible item, worth more than £50 and meets the other criteria, it is subject to tax.
- Nature of gift – if the gift could be exchanged for a cash sum and meets the other criteria, then it is most certainly taxable. This can include tickets, hotel stays, spa days and trips away. A potential exemption arises if the tickets were non-transferable.
- Purpose of gift – If you are given a gift worth more than £50 in return for promoting it on your social media channels, it is considered a form of non-cash payment and is subject to tax.
Some exceptions include:
- Gifts were given for personal rather than commercial use (the recipient must be able to provide proof).
- Gifts or benefits given to close family members.
- Gifts or benefits given to registered charities.
It is your responsibility to consider the above criteria and determine whether a PR package is taxable. If a gift is taxable then it should be reported to HMRC, or you could face serious penalties for not declaring them.
What are the consequences for not declaring a PR gift to HMRC?
By not declaring a PR package, you can face a penalty if you were investigated by HMRC. If the error was deemed as a mistake, the penalty could be between 0% and 30% of the tax due. If they deem the mistake to be deliberate, you could face a penalty of up to 100% of the tax due.
How do influencers pay tax on their PR gifts?
As a self-employed influencer, you must submit a self-assessment tax return to HMRC. You must report your earnings for the relevant tax year which runs from 6 April to 5 April. Your tax return must be filed to HMRC by the end of January for the previous tax year. For the 2023-24 tax year, the filing deadline is 31 January 2025.
If you received PR packages as a ‘payment-in-kind’ to promote them on your social media pages, then you must report them on your tax return. The tax is then calculated as a percentage of the total value of the gift(s) received. This percentage is set by HMRC, currently held at 10%.
It is possible to reduce the tax paid on your PR packages by claiming expenditure which relates to the promotion of the item, including the cost to receive it.
What is a payment-in-kind?
If you receive goods instead of cash in return for promoting a product or brand, it is considered income through a payment-in-kind (PIK). This must be declared along with your other income on your tax return.
We advise our client’s who are social media influencers to consider the value of the gift they are receiving and the tax implications on them.
Taxsure specialises in accounting and tax planning for influencers.
If you are a social media influencer, then working with Taxsure will save you time, money and stress.
We understand your business and can select which services you require depending on your current situation. We offer a free consultation to each influencer and build an accounting package tailored to their needs. Get in touch with our influencer accountants today.
In summary
When you receive any form of PR package as an influencer, it is your responsibility to judge if it is taxable; and if so, you must report it to HMRC as part of your tax return.
Not all PR gifts are subject to tax. However, if a gift exceeds £50 in value, has a transferable cash value and was given in return for a promotion, usually indicates it is a taxable gift.